China private banking debate: Managing a wealth of riches in China

The nation’s private banking industry is blossoming, but even as it flourishes, leading players have to move fast to keep up with a changing market and an increasingly demanding and diverse client base. Euromoney gathered together a panel of private bankers, wealth managers and economists to discuss the market’s key issues in July.

• China’s private
banking industry is growing rapidly
• New clients are
often young and confident
• Investor
education is a priority
• First and
second generation clients have very different demands
• Branding
and marketing, as well as product range,
are paramount

Elliot Wilson, Euromoney How fast is the
private banking industry growing and changing in China? And how
can your institution ensure that you are getting a big slice of
the business?

YIJ, ABC We have more than 64,000 clients,
with an average level of assets under management of Rmb12
million ($1.88 million), and our client base is growing by 23%
each year. Our private banking business has been experiencing
rapid development in recent years, adapting to the
wealth-management needs of HNWIs [high net-worth individuals],
notably when it comes to wealth preservation, creation,
inheritance and accumulation.

Since the establishment of Agricultural Bank of China
private banking department in 2010, we have been increasing our
market share by providing our clients with comprehensive asset
management, financial management, financial consulting and
cross-border financial services, as well as value-added
services.
We describe our value-added services as 'five butler services’.

JW, CMB The average and total wealth of our
private banking client base is growing very quickly, presenting
us with a considerable number of new and profitable
opportunities. Our clients are typically natural entrepreneurs
who have built their own companies, then gone about completing
initial public offerings, accumulating large sums of new
wealth. We kicked off our private banking business in 2007 and
it has been growing by 30%-40% a year. Our client base is broad
and diversified.

China Merchants Bank, which puts great emphasis on service
and providing high-quality advice to clients, notably when it
comes to the make-up of their wealth portfolio, is not a
state-owned bank. We provide high-quality advice to our
clients, notably in terms of professional advice on the make-up
oftheir portfolios.

Our clients have a higher risk appetite than normal and are
willing to invest more of their capital with us. We can help
them in any number of additional ways, offering credit cards,
loans, mortgages and financing. More Chinese HNWIs are also
exporting their assets and investing their earnings overseas,
so we are in turn investing heavily in our own services and
infrastructure to keep pace with that demand.

YUJ, ABC-CA According to a new
report, the number of newly wealthy citizens in China is
growing rapidly. In 2015, the amount of disposable wealth in
the country is projected to hit Rmb129 trillion, a 16% increase
over last year’s figure. The total number of HNWIs
in China is set to hit 126,000 this year, while total
disposable assets are set to reach Rmb33 trillion. The origin
of new wealth creation has also changed. Not long ago, half of
all new wealth emanated from investments in the property
sector. That share has fallen this year, to 40% from 50%, while
investments stemming from financial services and the capital
markets has risen to 60% of all new wealth formation.

As a fund manager, there are more things we can do to
develop the market. Take ABC, a large state-owned bank that has
a different and larger population of wealthy clients than the
likes of China Merchants Bank. ABC has a long history of
working in and with the public sector and with state-owned
enterprises, and there is so much wealth still emerging from
this group of customers. Their risk appetite is lower than in
the private sector, but it is changing. So we decided to set up
a special account with ABC that helps them manage the funds of
their clients. I believe there is much more that we can do to
help roll out better private services to mainland clients, and
we are making those changes. Before, our branches were siloed,
which kept accounts separate from one another, rather than
integrated into a single, centralised investment channel and
network. So we built a joint venture, and began working with
ABC to provide a more comprehensive portfolio of investment
services. We hope to ensure greater integration and synergies,
to boost IT infrastructure and to offer new services to all our
clients.

EG, UBS UBS is the largest wealth manager
globally and has more than 150 years of experience in serving
the world’s wealthy. Asia Pacific is contributing
substantially to our global wealth management business, where
we hired 200 client advisers in 2014 and will continue to hire
strategically based on the needs of growth. Wealth creation in
China is leading the region, and private banking is going to
continue to grow, which presents great business opportunities
to UBS. Excluding the Americas region, net new money in our
wealth management division was SFr8.4 billion ($8.8 billion) to
the second quarter of 2015, with Asia Pacific the main
contributor.

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